After Telebras, most top Latam assets untouchable
By Axel Bugge
BUENOS AIRES, July 30 (Reuters) - The $19 billion sale of Brazil's telecommunications giant
Telebras (TBR - news) could be the zenith of Latin America's privatization process since most
remaining prime state assets are considered politically untouchable.
In one swoop, the Telebras sale almost matched the combined proceeds of all state sales by one of
the region's privatization pioneers, Argentina, which has raised about $21 billion since 1990.
''Never has there been a privatization like this in the history of capitalism,'' Brazilian President
Fernando Henrique Cardoso said.
Coinciding with the radical open market reforms that have swept Latin America in the past decade,
governments in Chile, Peru and Mexico started selling assets in the 1980s.
They unloaded ailing telephone companies, inefficient electricity firms and troubled airlines to
foreigners who eagerly poured billions into the region, betting those firms would give them hefty
returns as economies were opened.
So if Brazil, the region's economic heavyweight, has now sold its most prized asset, what gems
remain for sale?
Brazil's next government, which will take office after October's elections, must decide whether it
wants to sell Banco do Brasil, the country's largest financial institution, and oil firm Petrobras. But
analysts doubt that either would reap the amount officials collected from Telebras.
Many governments insist the few choice state firms remaining are too valuable ever to let go to the
private sector.
State oil company Petroleos de Venezuela (PDVSA), the second largest oil company in the world,
is undoubtedly the largest remaining untouchable company in Latin America.
Venezuelan Congressman Luis Montiel Ortega said recently it would be nothing short of ''treason''
to sell PDVSA. ''It would be like the United States privatizing the Pentagon,'' he said.
Important oil producers like Mexico, Venezuela and Ecuador have been steadfast in their opposition
to selling their black gold. Only reluctantly have some agreed to allow partial private involvement in
exploration and other projects.
In Mexico, a government plan to sell secondary petrochemical plants from state oil company Pemex
had to be trimmed to a minority privatization amid union and political clamor. The sale has been
stalled more than six years.
Among the major regional economies, only Argentina has sold its oil company, YPF (YPFd.BA),
which was privatized in 1993.
Meanwhile, for all its zeal in privatizing and transforming itself into Latin America's star economy,
Chile stubbornly maintains its grip on copper company Codelco --''the company of the Chileans.''
Juan Villarzu, Codelco's former head, once said: ''Codelco's mission is to maximize, in the long
term, the generation of economic profits and support for the state.'' Chile is the world's largest
copper exporter.
At least one country, Uruguay, has been left out of the privatization loop altogether. It went to the
voters to see what they thought of privatizing state companies, and 72 percent said ''No'' in a 1992
referendum.
Ignacio De Posadas, an advocate of privatizing Uruguay's state energy, telecommunications and oil
monopolies under President Luis Lacalle's government in 1991, said this week: ''Uruguay is an
international oddity, because its public companies cannot be touched.''
Walter Molano, director of Latin American economic and financial research at SBC Warburg,
disagrees with government officials who say those last gems will never be sold, noting that Telebras
was once considered untouchable too.
''Nobody would ever have thought a Latin American company could have generated $19 billion,''
Molano said.
Low oil prices or other economic conditions could make governments think again. ''Never say
never,'' he said, when asked whether the Telebras privatization would ever be surpassed.
According to some estimates, Venezuela's PDVSA could generate as much as $120 billion if sold,
making Telebras look like small change, he said.
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